The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Part 1

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Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

Planting Seeds in the Borrower's Head - Part 1

 

With so many mortgage changes, can it confuse the hell out of you?

In regards to the world of mortgages, can one be more confused now then ever before? You betcha...  As many of us know, FHA is now trying to reduce the seller concession from 6% to 3%. I wrote about it here : HUD seeks public comment on 3 issues for FHA loans & Solutions for these FHA loan changes.

Let's take this up a notch now. Just the other day, I wrote a post about some listing agents not accepting offers for FHA loans and or VA loans for various reasons. There could be several ways to look at this... but there is more.

My post is sparked by a post that Lenn Harley wrote yesterday; Lenn just had a Eureka moment!! Conventional financing may permit more seller incentive than FHA. Now, don't get me wrong. I respect Lenn and many of her opinions. I will agree with the first part of her post, in regards to the questions that were asked. But I have to disagree with the 2nd part, because in my opinion, a realtor should only discuss the very basics. Lenn points out that she is looking at the forest while I look at the twigs. Well, it's my job to look at the twigs when discussing such issues when it comes to the different types of mortgages. And I believe that Lenn was looking at some of the branches when giving her opinions, and not the forest.

 

 

 

mortgage 101 - the forest

Let me define what should be the forest for the realtor. What should a realtor know and how far should they go.

A realtor should know that there are FHA loans, VA loans, Conventional loans, USDA loans, and any special kind of grant programs or state mortgage programs in their area. The realtor should know the function of each loan. And in my honest opinion, they should stop there.

 

 

So if a borrower came to you with a loan officer already, you might want to stick to the basic questions. This would be my opinion of what a forest would be for that realtor.  One of your questions to the borrower is asking them if they are military or ex-military. If they say yes, you then ask them if their loan officer went over VA loans and compared them to conventional & FHA loans. Or if you are predominantly in an area where USDA loans are accepted, you ask the borrower if this option had been presented to them. If you are a realtor like Lenn Harley, to where you have your buyers fill out a buyer's financial statement and you see good assets, you ask them if the loan officer went over various methods of financing.  Such as putting 5% down to 10% down, and comparing this to a conventional loan or an FHA loan.

Here is where I run into the problem of a realtor taking this a step further. Lenn mentions this in her post.

"Our home buyers can receive 6% closing help with 10% down.  Which benefits our buyers more, making a larger down payment or paying their cash for closing costs???"

Why I am upset about such a statement is that there are still way to many unknowns. And if you as a realtor make this suggestion and make it sound like the answer would be to put 10% down so you as the buyer can get the seller help of 6%, this could be a huge mistake. I know Lenn's statements are general and she even says this, but I think that can cause more problems than good. And if the loan officer doesn't know any better, how can you as a realtor know what is better then?

Here is another general statement that Lenn makes.  "The lower interest rates often offered with 10% down compared with FHA may make the conventional more attractive."

In my opinion, this is just an assumption that could very well play tricks on the borrower's mind.  I will tell you why some of these statements can create more problems than one would think. If the borrower starts to believe everything that the realtor says, and I end up crunching some numbers that actually make sense and explain this to them, they might still turn down my suggestions.  Even if I show them on paper. Yes, this has happened before.

 

 

Conclusion : Trust me, I understand what Lenn is saying and trying to do. But in my opinion, if you go below a certain point as a realtor when explaining their financing options, could you actually hurt the situation more than help it. I say yes.  And yes, we will have some bad loan officers in this business, period.  It's a fact.  But if you think something doesn't sound right, you just seek other like-minded mortgage professionals that you trust. But don't take it in your own hands to get into more specifics. That is why I do mortgages for a living, full time, and nothing else. I don't give opinions based on assumptions, I give facts based on collecting facts. And yes, in my opinion, there is a huge difference. What people need to understand is that a borrower's decision could be influenced because of what they heard from their realtor, just like when borrowers tell you that their dad tells them to pay no points, or to put 20% down to avoid mortgage insurance. It happens.

 

Part 2 - Facts & Numbers vs Assumptions -

In part 2 tomorrow, I am going to dissect the differences of putting 10% & 5% down on conventional loans with different credit scores and showing the difference on FHA loans with 3 1/2% down and those same credit scores. I want to introduce different reasons to why even with 10% down and getting the seller to pay an additional 3% could be worse for the buyer, such reasons to make you think otherwise.

 

 

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

HUD

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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- FHA Loans - USDA Loans - VA Loans -

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Experience & Knowledge at its BEST !!!

 

 

Follow me on:

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______________________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

HUD

 

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Topic:
Lending / Financial
Location:
New Jersey Camden County Cherry Hill
Groups:
Realtors®
Mortgages
All About Mortgages/Mortgage Networking
Realtors Needing the services of the Lending Powers
The FHA Mortgage Group
Tags:
fha loans
seller concessions
seller paid closing costs
conventional loans
fha mortgages
fha home loans

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Rainmaker
662,099
Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Thank you for getting this out to us today.  Good read.

Patricia/Seacoast NH

Aug 04, 2010 11:23 AM #13
Rainmaker
405,221
Marney Kirk
Cummings & Co. Realtors - Towson, MD
Towson, Maryland Real Estate

Jeff, you really know your stuff. That being said, I can't wait to see Lenn's response... :)

Aug 04, 2010 11:36 AM #14
Rainmaker
1,422,752
Bill Burchard
3B Realty: 951-347-3818, CA - Murrieta, CA
Broker, Realtor, Representing Buyers and Sellers

Thanks for the info, Jeff. I look forward to reading Part 2. 

Aug 04, 2010 11:39 AM #15
Rainer
176,189
Julia Odom
Select Realty Professionals - Chattanooga, TN
Chattanooga Homes for Sale

I agree with you in principle, however, I occasionally run into buyers who found a lender before contacting me and that lender is steering the buyer into the ONE program they have that might possibly work. In most cases there are other programs that might be better for that individual and I feel like I wouldn't be handling my fiduciary responsibilities if I didn't point out where another program might work. I'm always going to recommend that they look all of their options and get better information about why and why not it isn't for them.

But then, maybe that's exactly what you were saying...

Aug 04, 2010 11:50 AM #16
Rainmaker
289,259
Jay Beckingham
SWBC MOrtgage - Port St Lucie, FL
Seniors ROCK!

at least in southwest florida right now, where conventional MI loans are fairly limited, we will need 2 submissions for an MI loan. The MI company will also underwrite the file themselves.

fha, one in house approval.

cost comparison/need more info

appraisal issues may arise with 6% seller concessions on either loan. 

Aug 04, 2010 11:52 AM #17
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
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GARY... . this is a very important point that I didn't bring up in this post, because it was getting long.  But in part 2, I am going to reference to your comment.  Thanks for the kind words.

PAT K. .... . thanks for this kind of feedback. Because you like conventional better and because of past bad experiences with FHA mortgages,  can you influence your borrowers decisions?  I believe this could take place if a realtor would talk about it much and give examples... but still not knowing everything about these borrowers and or about mortgages in depth. I hope you come back to part 2 later to see some of my examples. And in regards in getting licensed in DC... because of the new licensing laws and the costs, if I knew it would pay off, I would definitely think about it. Thanks for the support.

JEFF... . that is my whole point, that realtors can cross the line and it could hurt that borrower.  In regards to court cases, I haven't seen anything and will look into this.  thanks

PATRICIA... .  my pleasure and thanks for stopping by... and thanks for the compliment.

MARNEY... .  I hope Lenn chimes in here. I do respect Lenn and what she knows and does. But with so many that follow her posts, and the comments that I read, I don't think some of these realtors thought this all out.  And basically because they don't know the specifics with these mortgage programs, which I will share in part 2.  And thanks for the kind words.

BILL... . my pleasure and I hope not to disappoint in part 2.  thanks

 

Aug 04, 2010 12:06 PM #18
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Jeff Belonger
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JULIA.... . your comment is exactly what I am talking about and I think you get it. I don't have a problem when a realtor realizes this and asks their go to loan officer to give them feedback.  I do believe that it's part of your fiduciary responsibility to help these borrowers out when you see this. But not to get into details or giving answers.  But just by putting them in touch with a reputable loan officer just to make sure. Just as in my examples in my post.  If you live heavily in a USDA area, but the borrower is going with a conventional or FHA loan, you would want to question this.. but then hand it off to a good loan officer and nothing more.  Giving details like putting more money down to avoid this or to do that, in my opinion, could be bad for the borrower.  So I do think you get it.  Thanks for your input and feedback.

JAY... .  thanks for the laugh. Why don't you write the post for me?  Seriously, these are some very good points that will be talked about in my part 2... and that this shows that real estate is truly local.

 

Aug 04, 2010 12:14 PM #19
Rainmaker
35,208
Speed Equity® Mortgage Acceleration System
Speed Equity® - Olympia, WA
We help your clients Own Their Homes Years Sooner

Well put Jeff. Too many times professionals from one arena feign expertise in an area that they have absolutely no business venturing into. RE agents are no different.

What you are doing is excellent in terms of educating EVERYONE - keep up the great work.

Aug 04, 2010 12:38 PM #20
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Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

Jeff, I love you, but my attention span isn't functioning today so I didn't make it to the end.  I did make it far enough to draw the conclusion that I probably agree with you both.  How's that for being non-commital?  Really, it depends on the case and the situation, and I don't think one can generalize on this.

Aug 04, 2010 12:39 PM #21
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Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

Jeff - I do agree with you, I am not a mortgage broker and you are not a realtor - each has their own area of expertise and basic knowledge of what the other party does - I do not get into the mortgage aspect beyond the basics and guiding my client to a good mortgage representative!

Aug 04, 2010 03:13 PM #22
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Jeff Belonger
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HARJ... .  I think many of us would agree with this..  it irks some of us loan officers when a realtor gives more advice than they should... especially when the borrower is now confused by the different so-called facts..  And thank you very much for the polite compliment & kind words.

MARGARET... . what would your husband say to that comment of yours... lol  Well, I have agreed with both on different subjects before.. but I can't see how you could agree with both on this subject.  Not unless we define on how far the realtor takes it. Please read Julia's comment, comment #16.. that is how far I think a realtor should go.  Now, for tomorrow's homework, I want you to go back and read the rest of my post :o).  I give some more details at the end.  And to be prepared for part 2.

BARBARA JO... . I think many of us would agree with this.... and some don't.  This post is more for the borrower who might run into this...  and thanks for reblogging this..

 

Aug 04, 2010 04:33 PM #23
Rainmaker
101,176
Rick Phillips
Frankly Realty - Old Town - Alexandria, VA
I care about you and your transaction.

Many times when talking to a client about mortgages, an agent is relating past experiences that involved a particular situation.  The problem is that these situations have changed so much over the past three or four years.  Banks that were once strong our out of business.  Programs no longer exist. 

Now, it's not impossible for an informed agent to pass on very good information, but it's more likely that the loan officer will both be more up to date with his knowledge and have more recent experiences involving scenarios that played out under the recent rules.

Just to throw one more monkey into the wrench:

Part of any agent's job (a large part) is to protect his client.  And no offense directed here, but bankers have not been looked upon too favorably recently.  I mean, to really be honest, the nicknames for loan officers back in 2000 were "sharks," and "wolves."  I think it got worse, not better sicne then.  Fly-by-night mortgage companies pushing crap products on stupid borrowers didn't help their images.  (I say this not because I am so very perfect, but from the perspective of a stupid borrower :D).

Jeff, you're doing one of the best things a loan officer can under these circumstances: putting it all down in writing.  Here on AR you are holding yourself up for review later on.  You are saying "This way works because X, Y, and Z," and you are held to that because it's difficult to go back and change X later since someone could hold up your earlier post.

Aug 05, 2010 12:34 AM #24
Rainmaker
292,354
Home Loan Search.Online
Home Loan Search Online - Newnan, GA

I have my real estate license not because I want to practice real estate (I don't but my license is active) but to know and understand the process that real estate agents here in Georgia go through and learn about SAFE ACT, financing, etc. Your absolutely right that it is our jobs as mortgage professionals to look at the twigs.

Darrell Walters, Newnan Morgage

Aug 05, 2010 02:13 AM #25
Rainer
324,600
Mark Robinson
Geneva Financial, LLC - Beachwood, NJ
Honesty, Integrity, Service

Jeff, I could not agree with you more!

I have never heard a mortgage professional say "Let me show you some houses" or "I think your paying too much." How would I even know prior to appraisal?

We do refer clients to Realtors, but I've yet to see one of us try to practice real estate.

Let's all practice our in our specific areas of expertise.

Aug 05, 2010 02:23 AM #26
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Jeff Belonger
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RICK... . I understand that agents are relating to past experiences when talking to a new client.  But that could be like pouring gasoline on a fire. Not one borrower is the same.  - I want that same deal that my friend got !!!! -  And some realtors are still talking about things that took place in the late 90's. You stated this...

"Now, it's not impossible for an informed agent to pass on very good information, but it's more likely that the loan officer will both be more up to date with his knowledge and have more recent experiences involving scenarios that played out under the recent rules."

First off, in some states, because of the new licensing acts, if you aren't a licensed originator, you can not breathe mortgages and anything about it. And yes, I know there are still bad loan officers out there.  In regards to the comment about Bankers?  Both Bankers and mortgage brokers have had shots fired at them. In reality, I don't care what the public thinks or what realtors think on this.  Because many don't even know the true differences. I am a mortgage banker, that can underwrite in-house, close in-house, yet after closing we sell it to an investor.  That should be changing in 90 days.. but then you have the actual banks such as Wells Fargo or Bank of America, where they do the same but they also service the loan. Again, I know bad people that worked on all levels, as a Bank, a mortgage banker, and as a mortgage broker. Much of the information out there is misleading with bits and pieces... and thanks to the media... that the average consumer can only assume.

Overall... yes, I do put myself out there with these kinds of posts.  But to me, this is true transparency. Some people in the mortgage industry tried changing the word transparency to sound like all lenders had to show what the rate was costing them and their profit. Kind of like when buying a car and you can look at the invoice.  But I do thank you very much for your input, feedback, and for the kind words and compliment.  Again, thanks.

 

DARRELL... . thanks for pointing that out.  Because Lenn said that she looks at the forest while I look at the twigs.  Yes, it is our job to look at those twigs.. anything short of that could cause trouble and I am hoping to show this in part 2.  thanks

MARK... .  I am sure that there are some loan officers that give real estate advice...  I just stay away from it for the most part and if it deals with real estate, tell them to speak to a realtor... if it's real estate law, to go talk to a real estate attorney.  thanks

 

Aug 05, 2010 03:05 AM #28
Rainmaker
835,959
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Thanks Jeff, good post.

Aug 05, 2010 05:15 AM #29
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Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

Jeff, I really don't think all Realtors are as smart as Lenn. She is an exception to the rule. The point I got from her post was knowing where to refer a buyer too.

Let me give you and example on financial planners.

98% work for a comany and they are going to put you in a plan that their company offers. Mike and I hunted for years and found one that was NOT tied to a company, he was paid for his advice and didn't sell us a product but showed us the best places to invest. He got nothing for that because he was paid up front for his knowledge.

It takes time for a Realtor to know which programs are best for their clients, which lender offers those programs, and who is good and get to closing on time.

again...not all Realtors know where to go.

Aug 05, 2010 07:15 AM #30
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans
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Jeff Belonger
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The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

NICK & TRUDY..... . thanks for stopping by and for the compliment.

 

MISSY... . yes, Lenn is an exception to the rule and she knows it also.  But the problem that I have is when writing about it and then reading the comments such as... "excellent post, great way of breaking down the numbers, it makes sense".... which I saw many comments like that.... scares me because then I have to assume that those realtors will try and or do the same thing.  And in all honesty, realtors should not go beyond a specific point in their conversations with the borrower.  Besides, because of the new licensing rules and such, they need to be very careful anyhow.  In some states, the only person allowed to talk and breathe mortgage information, is that person licensed by the state now.  In Florida and Arizona, they are cracking down big time.

In regards to your example about the financial planners.... I understand, just like loan officers, CPA's... anyone that has to crunch numbers. But does that give the realtor the right to take the bull by the horns and do this on their own?  Not trying to sound mean, but take a look at my part 2 and my chart.... if a realtor can say that they can break it down just like that, knowing the credit score issues, the penalties, and the rest of the differences to make those kinds of statements that Lenn made... they hey, more power to you. But if not, a huge reason why realtors just need to have basic control.  And if they see some red flags, not to really give info and or an opinion, but to get a qualified loan officer involved.

Lastly, you said it takes time.  One suggest for those realtors that wouldn't know then or know a good loan officer to check this stuff over... would be to align themselves with experts such as yourself, that you could introduce them to your great loan officer then. Anything outside that, in my opinion, is just an excuse... now, that is just my humbled opinion.  Thanks for your input and for stopping by.

 

Aug 05, 2010 01:02 PM #32
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